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Regional grants: are they worth it?

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  • Colin Wren
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    Abstract

    Regional grants have recently come under scrutiny and are controversial. Some estimates put the employment effect of these grants at no more than 6,000 jobs in the first half of the 1990s, against expenditure of £500 million. Other aspects of the grants are questioned, such as their ability to attract foreign direct investment and their effect on productivity. This paper reviews these issues, focusing on the recent evidence for the Regional Selective Assistance scheme. It describes the nature and difficulties involved in policy evaluation, and finds that differences over the employment effect of the grants result from possible biases induced by the evaluation methodology and from differences in the job measure used. Overall, the paper argues that the regional grants are cost-effective in employment terms, but that expenditure is small relative to the scale of the problem, so that an expansion of the grants may be desirable.

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    Bibliographic Info

    Article provided by Institute for Fiscal Studies in its journal Fiscal Studies.

    Volume (Year): 26 (2005)
    Issue (Month): 2 (June)
    Pages: 245-275

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    Handle: RePEc:ifs:fistud:v:26:y:2005:i:2:p:245-275

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    Cited by:
    1. Wren, Colin & Jones, Jonathan, 2009. "Re-investment and the survival of foreign-owned plants," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 39(2), pages 214-223, March.
    2. Andy Pike & Andrés Rodríguez-Pose & John Tomaney & Gianpiero Torrisi & Vassilis Tselios, 2010. "In search of the 'economic dividend' of devolution: spatial disparities, spatial economic policy and decentralisation in the UK," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 33560, London School of Economics and Political Science, LSE Library.
    3. Ankarhem, Mattias & Daunfeldt, Sven-Olov & Quoreshi, Shahiduzzaman & Rudholm, Niklas, 2009. "Do Regional Investment Grants Improve Firm Performance? Evidence from Sweden," Ratio Working Papers, The Ratio Institute 137, The Ratio Institute.
    4. Jonathan Jones & Colin Wren, 2008. "Re-investment and the survival of foreign-owned plants," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 33138, London School of Economics and Political Science, LSE Library.
    5. Jonathan Jones & Colin Wren, 2009. "The dynamics of FDI location: a markov analysis for British regions," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 33497, London School of Economics and Political Science, LSE Library.
    6. Colin Wren & Jonathan Jones, 2011. "Assessing The Regional Impact Of Grants On Fdi Location: Evidence From U.K. Regional Policy, 1985–2005," Journal of Regional Science, Wiley Blackwell, Wiley Blackwell, vol. 51(3), pages 497-517, 08.
    7. Riccardo Crescenzi & Fabrizio De Filippis & Fabio Pierangeli, 2011. "In tandem for cohesion? Synergies and conflicts between regional and agricultural policies of the European Union," LEQS – LSE 'Europe in Question' Discussion Paper Series, European Institute, LSE 40, European Institute, LSE.
    8. Jonathan Jones & Colin Wren, 2008. "FDI Location Across British Regions and Inward Investment Policy," SERC Discussion Papers, Spatial Economics Research Centre, LSE 0013, Spatial Economics Research Centre, LSE.
    9. Jonathan Jones & Colin Wren, 2008. "FDI location across British regions and inward investment policy," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 33204, London School of Economics and Political Science, LSE Library.
    10. Jonathan Jones & Colin Wren, 2008. "Re-Investment and the Survival of Foreign-Owned Plants," SERC Discussion Papers, Spatial Economics Research Centre, LSE 0003, Spatial Economics Research Centre, LSE.

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